Steemit Crypto Academy Contest / S1W4 – Reviewing the Instability of the Crypto Market by @whitestallion

1.Most of the cryptocurrency market is currently experiencing a sharp decline, especially in recent days. What do you think of this drop? State its causes and how long do you think? State its causes and how long do you think it will continue in this downtrend?

There has been a massive decline in the crypto space which has been attributed to a decline in the economic standard of the world. Part of the reason is that Tesla had made a U-turn in making Bitcoin a currency that can be used to make payments. Some other reasons include clamping down on some ICO and other block exchanges. The prior mentioned car company purchased about $1 billion shares of Bitcoin. There was an announcement by the billionaire, Elon Musk stating that the environmental impact of mining Bitcoin is gradually on the increase. The rapid increment in the amount of fossil fuel emissions for Bitcoin mining is a cause for concern. The famous Cryptocurrency known as Bitcoin referred to as the father of all cryptocurrencies has been on the bearish side and has lost about 30% of its value. A few months ago, Bitcoin hit its all-time high at $69,000. Due to the decline in S&P 500, traders have been counting losses upon losses. Risks assets such as Bitcoin experience major amounts of volatility in market systems.

There has been a significant crash in the Terra (LUNA). Over the weekend, Cryptocurrency lost about 90% of its value. Terra’s protocol has its native token called LUNA It’s the peg system for TerraUSD. The issue is that Luna was making HEADWAYS before the weekend.

There are myriad reasons behind the downtime experienced by the flagship Cryptocurrency. The principal reason revolves around the reversal in the acceptance of the digital asset globally. Furthermore, there the concerns that have been arising because of the volatile and unpredictable nature of the asset.

I think this decline in Cryptocurrency is normal as we all are aware of the volatile nature of the market. With the sentiments that make people enter a trade, FOMO (fear of missing out), and whatnot, the market is bound to fluctuate. Although the current decline is terrible, we all as crypto traders are aware of this. I also perceive that the major source of concern is the security and exchange commission registration and regulations. These are bodies that are mandated with the responsibility to regulate and monitor the operation of the financial markets. Other markets such as the stock and forex market have some level of stability in contrast to the crypto market. There have been days that the prices of assets have recovered and risen to a considerable extent even with the dip. The crypto market has a lot of variables that control it however, buying and selling remain the chief of all the reasons. All traders must be wary of seasons like this however, I hope that once there is a deposit of huge demand options in the market, we will observe a recovery.

As a matter of fact, we all are aware that Bitcoin has been accepted in Salvador and there have been a few rumors here and there, about other countries and regions adopting Bitcoin as a legal tender. Because Cryptocurrency has not largely been accepted to serve as a legal tender, there is a general fear long-term holders have because of the uncertainty in the space. I think the market will recover in no long time from now. It has observed its fair share of decline and I envision how high the prices of assets will be soon.

Why doesn’t this drop in the price of a few coins decrease their trading (volume e:g Bitcoin) How will they deal with this market instability?

First of all, during one of the seasons in the academy, we were dealing with the structure of the Cryptocurrency market. We were meant to understand what the market structure is. There are a set of people called the market makers. These are bodies of organizations or people who have a heavy influence on the state of the market by reason of the number of assets they possess. They have the capacity to plunge the market in any direction they please. Financial institutions such as banks are an example of market makers. There are a few ways you could identify the presence of the market makers in a market. One of the major pointers is the sudden change in the direction of price action in a market. Having said that, there is a major difference between people who HODL their assets and those who trade regardless of whether the market is bearish or bullish. These traders are the set of people who ensure there is stability in the trading volume of digital assets. The operations of these kinds of actions in the financial market make the price hit positions of support and resistance. More so, this helps to keep the volume almost stable even though there are seasons when the market becomes mainly bullish or bearish. To deal with this level of market instability, we have to be more careful and employ the use of stable coins. Coins like the BUSD and USDT are good ways to escape the fluctuating nature of the volume of assets.

• What is the relationship between the current instability and the fall of the Terra ecosystem and its Luna currency?

Do Kwon and Shin Daniel mastermind the creation of the Terra ecosystem in the year 2018? It was designed to be an e-commerce payments gateway that would help create a stable Cryptocurrency in lieu of other stable fiat assets. In the year 2020, a man called Nicholas Platt introduced who was the head of research introduced something called the anchor protocol. This platform was built on the Terra ecosystem that gave investors some ridiculously high yield on their deposits into the network. Come March 2022, there was a series of arguments and disagreements between heavyweights in the space who claimed and bet that LUNA was going to be below $88 and whatnot before 2023. All of these had caused a lot of hiccups and anxiety amongst the general public. Furthermore, purchases of about 27,000 BTC were made and it seriously affected the stability of the ecosystem. LUNA crashed down about 90% of its value. There was a serious moment of wailing amongst long-term holders. Binance had to delist the coin although it relisted it eventually. The creator of the network, Do Kwon explained some plans he had to revive the failing ecosystem, During the attempt to save the UST peg.

The UST coin had a way it operated in relation to the LUNA coin. The thing is that the LUNA coin goes through a process of burning before you obtain UST. In that same vein, the UST is equal to a dollar. The rate of selling is directly proportional to stability.

• Do you think its price will recover? If so, tell us how and when?

The damage has already been done and we need to observe cautiously. I personally bought some dollars’ worth of the coin especially when there was a little surge of its price. Thus, we have been optimistic, hoping that the coin will experience a better phase of revival. Personally speaking, I do not have a blueprint in mind that I think the network would make use of, in order to recover the price of the asset. I do not see it regaining its prior ATH anytime soon but, it is the crypto world. Anything can happen at any time. We hope that it recovers anyway. The CEO would need to win the heart of the public and the investors present, for them to pump in money that would make the ecosystem recover from its current condition.

• Our steem ecosystem, like most currencies, has been affected by this market downtime. Has this caused you as a user some stress? Or are you still confident in this project? Give your opinion, specifying the arguments that support your answer?

To be candid, the downtime in the crypto market has taken a toll on a lot of projects. The almighty Bitcoin hasn’t been spared at all as other altcoins have been plummeting in response to it. At the point of writing this assignment, steem was $0.2575 with a decline of -3.89%.

The chart was set at the daily interval timeframe and we can see how choppy the market action was. The price of the asset dangled between areas of support and resistance without necessarily breaking out. The price of the asset had drastically dropped to about $0.2 with daily volume at 19M. With no ounce of pretense, I can categorically claim that this sudden drop in the asset’s price was a source of concern to me. Notwithstanding, the Steem network has been holding up quite nicely compared to other networks and assets. I believe that the steem network is going to make way and remain strong through this storm. As evident in my activities in the steemit space, I have big plans for the system.

I definitely have trust for network. Interestingly, the network has had troubles in time past, influenced by the volatile nature of the Cryptocurrency market. For example, there was a season in 2019 when the network experienced little hiccups. It was greeted by the exit of some members however, many stayed and I must confess, it was a decision well made. Furthermore, the blockchain has incorporated a lot of uses, the steemit social space is just one of the very things that will make the network remain gallantly. I won’t say I am a big boy in the steemit space however, I have made some progress and I plan on trail blazing some more.

Conclusion

In summary, the dip has hit us quite hard. We have lost money in no small way, we have experienced pain that knows no bounds. There have been stories of people committing suicide because of the decline of LUNA went away with their life’s savings. Having highlighted the reasons behind the dip, we hope that not only LUNA recovers but, the whole Cryptocurrency market as a whole.

All the images used in this post were extracted from tradingview unless otherwise stated.